1. The real cost of producing wheat in countries where wheat production has been modernized has probably declined by more than one half since the mid-1920's.
2. The real cost of producing rice in the countries where rice really counts had not declined until recently, and the recent modernization of some rice production has not as yet had any substantial effect in reducing the price of rice.
3. In countries where rice consumption is important and where the production of wheat and rice overlap to some extent and the production of each is being modernized, wheat has a head start; for example, in India and West Pakistan the recent modernization of wheat production is proceeding more rapidly than that of rice.
4. In general, further reductions in the real cost of producing wheat are likely to match reductions in the real cost of producing rice during the next decade.
5. Wheat may gain somewhat on rice as a food grain in parts of the "rice world," but except for Japan and Taiwan, it will mainly be wheat that is domestically produced.
6. Japan and Taiwan aside, wheat grown in the surplus-producing countries will not make much headway in replacing rice as a food grain in the major monsoon countries, with the exception of some coastal cities.
In the "rice world" the economic dominance of rice over wheat continues to be secure. The all-too-ready explanation is that rice-eaters simply will not eat wheat or wheat products. According to this view, consumer preferences in the "rice world" are strongly set against wheat, and therefore, the declines in the price of wheat relative to rice matter very little. But this widely held view of consumers in the rice-eating part of the world fails to see the lack of consumer incentives to shift to wheat.
If we had a reliable consumer price index for this area and if we had valid estimates of the opportunity costs (the costs of not choosing an alternative) of producing rice under traditional farming conditions in this area, my hypothesis is that they would show that this index and these costs moved virtually horizontally between the mid-1940's and the mid-1960's. It would follow that there was no economic incentive to substitute wheat for rice (58; 60, p. 135).
In the domain that belongs to wheat, the price signals are not ambiguous; the underlying supply and demand developments are also clear. In the wheat-producing countries that have modernized wheat growing, the real costs of producing wheat have come tumbling down. All the king's price supports, tariffs, quotas on imports, and programs to manage wheat production cannot put Humpty Dumpty together again. However, it is obvious that in these countries there can be very little substitution of wheat consumption for rice consumption. Moreover, as per capita incomes rise, less wheat is consumedrecent wheat crops of India-Pakistan weII over 20 million metric tons.